THOUSANDS of struggling homeowners could be in line for debt forgiveness after a Dublin couple had more than €200,000 of their mortgage debt written off by their lender.
The couple -- whose identity is known to the Sunday Independent -- secured a written agreement through Dublin-based solicitor Anthony Joyce with IIB Bank subsidiary Stepstone Mortgages, in November of last year, which saw their total debt reduced from €360,000 to €154,950.
The confirmation that at least one mortgage lender is now taking a pragmatic approach to customers who simply do not have the financial means to repay their total debt will doubtless be greeted with relief by homeowners across the country, many of whom are in arrears, negative equity and, as the latest Sunday Independent/Quantum Research poll has found, are increasingly fearful of losing their homes.
Asked last Friday what their greatest fear was, 41 per cent of those polled said it would be the loss of their home. The figure represents a12 percentage point rise on the 29 per cent who identified the loss of their home as their greatest fear when asked the same question in our poll last month.
Outlining the situation that faced his clients, Mr Joyce said: "They could not keep up with the repayments. They then left the home and intended to post the keys back to the bank. However, they called into my office with a letter stating that if they handed the keys back to the bank, they could be pursued for the balance of the mortgage.
"I advised them not to sign the letter, to put their property on the market and we would liaise with the bank. The bank was close to issuing repossession proceedings but eventually we achieved a buyer."
A copy of the agreement letter from Stepstone to the couple, released by Mr Joyce to this newspaper with their consent, states: "We wish to confirm that we will accept the sum of €154,950 as full and final settlement of all amounts owed by Mr X and Ms Y, on condition that funds are received on or before February 16, 2011."
Asked if he believed if his clients' case could see debt forgiveness being introduced for the thousands of other homeowners across the country who are now unable to meet their mortgage repayments, Mr Joyce said: "I believe that there will only ever be debt forgiveness for individuals who are financially ruined; ie, they have no job, they have no assets and are in negative equity. Otherwise the concept of an across-the-board debt forgiveness regime is not practical."
While AIB's executive chairman David Hodgkinson said last April that the bank was examining the possibility of debt forgiveness for mortgage borrowers in some cases, it is understood that no decision has been made on the matter yet. The Bank of Ireland, meanwhile, still maintains the official line that it works with all of its customers on an individual basis, while insisting that its customer remain liable for the outstanding balance on their mortgage in all cases.
A spokesman for Stepstone Mortgages declined to comment on the debt forgiveness given to Mr Joyce's clients, citing client confidentiality.
Outlining its policy on dealing with those customers in difficulty with their mortgages, the spokesman said: "Stepstone works closely with all its customers, especially those in arrears and works in a collaborative manner to work out a payment solution that works for both the borrower and Stepstone.
"In some instances, an arrangement between the borrower and Stepstone can result in the selling of a property at the current market value of that property," he said.
"As a result of the distressed housing market it does mean some properties have been sold at a level below that of the original loan. As each individual borrower's circumstances are different, there is no uniform arrangement Stepstone enters into with clients."
Concerns in relation to the potential for a wave of mortgage defaults were heightened only recently with the release last month of statistics from ratings agency Moody's, which showed how arrears on residential loans rose from 6.65 per cent in April to 7.62 per cent in June within a pool of €54bn in mortgages. The figures relate to more than a third of all Irish mortgages.
Moody's said the outlook for Irish home loans was negative, based on rising unemployment that would push more borrowers into arrears.